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The share price of Kirkland Lake Gold (LSE:KGI) (TSX:KGI) got a 24-carat response from investors today after issuing its Q3 2015 results. Its share price closed at 255.00 on the London Exchange, up by 4.08%, boosting it back to more than halfway toward its 52-week high of 334.00 and its low of 135.00 for the same period. It remains well above its 50-day moving average, which it has done since the beginning of 2015 with growth in excess of 37% on the year.
Kirkland Lake Gold has operated in my beloved province of Ontario, Canada for more than a century. Based on grade, the Kirkland Lake Camp mining complex is considered the second richest gold camp in the world. The company has used that fact to leverage its success on quality and grade rather than the norm of quantity and tonnage.
Kirkland Lake’s formula for success is simple:
Higher grade gold + reduced operating costs = positive cash flow
The hidden part of the equation is that it costs less to mine higher grade gold than it does for lower grade from the very start, so the variables in the equation experience marginal volatility. With that as an operational foundation, the company’s current corporate marketing brochure is spot-on with a title of “A Rich History – A Profitable Future.”
Check out these YTD results from today’s report:
- Its All-In Cash Cost per ounce is $1,289 CDN, in line with corporate guidance.
- Its cash operating cost per ounce is $813 CDN, also in line with forecast.
- The company has reduced its projected CAPEX spending by $8 million to $50 million CDN.
- Original guidance for revenue was projected at $200 million CDN. KGI has raised it to a range of $218 to $222 million CDN.
Now here comes the really good part. Please refer to the company’s formula for success.
- Cash flow from operations was originally estimated to be between $57 million and $60 million CDN. It is already at $57 million. Revised guidance now puts the year-end figure in the range of $70 to $75 million CDN.
- Free cash flow generation has also already exceeded the company’s previously published guidance of $15 to $20 million CDN by $2.4 million. The revised guidance projects the company to finish the year between $30 to $35 million CDN.
CEO George Ogilvie said, “We have made tremendous progress following the turnaround a year and a half ago and we are committed to strive for continuous improvements to strengthen the Company and create a return on investment for our shareholders. We are very pleased to see three consecutive quarters of positive results from the operations, generating positive free cash flow and ensuring we will achieve our stated guidance.”
Lest we forget, there is yet at least one more significant factor in the equation that makes Kirkland Lake Gold shine: It is located in one of the safest and lowest risk mining jurisdictions in the world. That alone is worth its weight in gold.
